Canada Bankruptcy Is Only One Path To Legal Protection From Creditors

Posted by: Sandy Lyons on 07/06/2011

The thought of declaring a Canada bankruptcy is so abhorrent to some Canadians they will endure the worst kind of threats from creditors and debt collection agents rather than seek the legal protection bankruptcy affords.

They believe the worst about personal bankruptcy.  When a debt collector implies they had better find a way to pay something because bankruptcy will destroy their credit forever, they believe it.

When a debt collector tells them even though bankruptcy may let them out of some of what they owe, the debt collectors will simply go after spouses to collect, they believe it.

Some struggle on for months, draining their available credit down to the last dime and borrowing from family and friends.  Others sign up for debt settlement plans, but eventually they simply cannot keep up with the required monthly payments. 

In short, many Canadians will do almost anything to stay out of bankruptcy.

We see people like that in our offices. They have done some Internet research and they know a Canada bankruptcy would give them legal protection against creditor collection activity of any kind at any time.  Yet they seek other solutions or struggle along on their own until the day comes when they get the legal notification of an impending wage garnishment proceeding.

 Then they come to us for help and are surprised – and often pleased – to learn that declaring personal bankruptcy is not the only way to get legal protection against creditors.  Depending on the total amount of your debt and your income, you have two other choices – a consumer proposal or an orderly payment of debts.

The Bankruptcy and Insolvency Act of Canada actually includes these non-bankruptcy alternatives for Canadians who can afford to repay more of their debts in exchange for avoiding a personal bankruptcy filing.  As you probably know, the law established the role of special bankruptcy trustee to work with insolvency filings and lays out the requirements for getting a federal license.

The law further charges us with the responsibility to ensure that everyone who walks through our doors receives counseling and advice on all debt solutions available, not just bankruptcies and proposals.  To see if a proposal or an orderly payment of debts would work in your situation, schedule an initial consultation with a licensed bankruptcy trustee in your province.  These first meetings are generally free of charge.